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Russian companies allowed to pay Foreign Creditors in Ruble

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Russian companies allowed to pay Foreign Creditors in Ruble
08 Mar 2022
6 min read

News Synopsis

According to a decree signed by President Vladimir Putin, Russia and Russian companies can now pay foreign creditors in rubles as a way to stave off defaults while capital controls remain in place.

This decree establishes temporary rules for sovereigns and corporate debtors to pay creditors from "countries engaged in hostile activities" against Russia, its businesses and its citizens. The government will make a list of such countries within two days.

Foreign currency-denominated Russian corporate bonds have recently fallen to a level that has been shaken significantly as investors have considered the impact of sanctions imposed on the country after the invasion of Ukraine. The Russian government has responded to sanctions by severely restricting access to foreign currencies. This may limit the ability of bondholders to receive interest and principal payments.

The Central Bank of Russia has also made a separate announcement saying that it will temporarily ease reporting requirements for Russian lenders in an effort to protect them from the pressure of sanctions. Commercial banks will not be required to publish their monthly accounts on their website anymore, though the banks will still have to submit to the central bank and can disclose to counterparties afterwards.

The payments will be considered executed if they are carried out in rubles at the official rate of the central bank. Debtors can also ask banks to create a special “C” ruble-dominated account in the name of foreign creditors. Meanwhile, local creditors will be paid through depositories. The rule only applies to amounts in excess of 10 million rubles per month.